Application of the LDA methodology on the management of operational risk of insurance company – Cadernos de Seguro – Teses | Nº 40

Author : Alaim Assad


Application of the LDA methodology on the management of operational risk of insurance company – Cadernos de Seguro – Teses | Nº 40

One of the main innovations of the Solvency Program is that insurance companies must dedicate part of their reserves to cover operational risks. The regulatory agencies have been proposing two calculation methods of this capital requirement:  the standard approach, based on a percentage of the pensions or reserves, and the more advanced approach, based upon an internal risk model. Alaim Assad’s thesis discusses the more sophisticated of these methodologies, the one called “LDA”, or Loss Distribution Approach.